Collections and Recoveries are the final two stages of the entire credit lifecycle. To understand the collections and recoveries landscape, we also need to understand the process taking place before an account enters collections.
For this reason, we are first going to touch on the various stages of the credit lifecycle preceding Collections and Recoveries, and thereafter spend time on the main subject of this Blog.
In this Part 1, we specifically focus on the first two stages of the credit lifecycle which are Leads and Originations.
Leads: The Start of the Credit Lifecycle
Everything in life has a starting point, and it is no different when it comes to the credit industry.
The credit lifecycle starts with the process of a company generating leads. Essentially, a company will identify potential new customers and then entice them through the use of marketing campaigns to take up specific products or services.
Efforts to market to potential new customers can either be done through targeted marketing campaigns or general marketing campaigns. The difference in approach between these two processes can be described as follows:
- Targeted Marketing – this is the process of identifying potential new customers that meet a specific customer profile that you would like to acquire. Targeted marketing is often done through the use of data and analytics. Once these customers have been identified, they are targeted and marketed to via a variety of channels such as through the use of outbound calling, or direct electronic messaging.
- General Marketing – this process does not specifically target potential customers that meet a specific customer profile, but rather markets to customers en masse. An example would be above-the-line TV campaigns or content placed in mainstream new publications, where not only a specific individual, but rather all individuals that come across the marketing content, are targeted.
Originations within the Credit Lifecycle
Once a company has identified a potential new customer, that customer will enter the “originations” process, also referred to as the application process.
During this process the customer is required to provide his/her personal information and documentation (such as salary slip and proof of residence) for the purpose of determining the offer that the customer would qualify for and the repayment terms of such offer.
Companies make use of both internal customer data (if available) and the customer’s credit bureau data to determine the customer’s credit worthiness. Determining credit worthiness is a regulatory requirement in terms of the National Credit Act (Act 34 of 2005), and companies are not allowed to offer credit, unless a credit assessment has been done to determine the customer’s capability to repay the loan or credit facility.
Once a credit assessment has been completed, the company will either offer the customer a loan or credit facility with associated terms and conditions, or inform the customer that his/her application has been unsuccessful.
On acceptance of the offer by the customer, the account will enter the “account management” phase of the credit lifecycle.
In Part 2 of this Blog, we will look at the next two stages of the credit lifecycle namely Account Management and Pre-delinquency Collections, before we delve into the main feature, Pure Collections and Recoveries.
Contact us, to find out how Principa can help you better manage your Collections and Recoveries.
About the author …
Perry de Jager: Head of Collections and Recoveries Solutions
Perry has been with Principa Decisions since 2015 dealing with Collections and Recoveries solutions for clients within South Africa, Africa and the Middle East.